Sunday, June 29, 2014

Income Inequality Is a Bogus Cause That Covers Up Wage Stagnation Due to Government

Recently, the media and a wide range of crackpot academics have been banging the income inequality drum. Charges of income inequality have been fundamental to socialism since its inception. When that inception was is subject to debate; Karl Popper claimed that it goes back to the ancient Greeks.

The Spartans had a communistic society based on the village's raising children, common dining, common schooling, and shared equality. There was no room for individual expression or self-actualization. The chief reason the Spartans are remembered today is their wars. The movie 300 celebrates their victory against Xerxes in the Battle of Thermopylae. More so, they are remembered for their leadership of the Peloponnesian League of Hellenic states against Athens in the Peloponnesian War. Although Athens abused its power, it was a quasi-liberal democracy; Athens invented democracy along with liberalism, science, philosophy, rhetoric, law, and theater.

Athens was a precapitalist society based on serfdom and slavery--as was Sparta--but it recognized private property. There was a considerable degree of income inequality in Athens, and Aristotle spoke of the importance of magnificence, what today might be called corporate social responsibility. The Greeks had a primitive view of private enterprise, but Aristotle began to see that private economic transactions are based on equivalent value; he saw such economic transactions as the foundation of human civilization. He did not, however, understand that technology can replace slavery as a source of value. That understanding began with capitalism in Europe, especially in 17th century Great Britain.

Communism sees all wealth as due to labor; hence, it discourages progress. Innovation under communism occurs through imitation of capitalist progress. If there is no capitalism, as is occurring in healthcare, then there will be no innovation because there is no reward for innovation. Marx saw no value as coming from innovation. He lifted this fallacy, the labor theory of value, from classical economist David Ricardo, but it is also consistent with Aristotle's philosophy, which Marx admired. Marxism, like Progressivism, reflects a medieval world view in which the universe is static and human intellect can grasp all knowledge. Marxism presses this superstition further by claiming that the dictatorship of the proletariat can run a command economy.

There was perfect equality among the citizens of totalitarian Sparta. In contrast, there was considerable income inequality among the citizens of Athens. Sparta is remembered for its warrior skills. Athens is remembered for innovation. Income equality is code for totalitarianism coupled with violence.

The Spartan economy was appropriate for its time; it was the Athenians who were well ahead of their time. The classicist Michael Rostovetzeff claims that in the fifth century BC the Hellenic colonies in Italy achieved a standard of living not again equaled until the 19th century.

All progress requires inequality. At the same time, inequality often occurs where there is no progress. Private ownership is necessary but not sufficient for innovation. The periods of great innovation, in fifth century BC Athens , 14th century AD Florence, and 19th AD America, were characterized by income inequality. Sparta had a much more equal society than Athens did, much as North Korea and Cuba have more equal societies than we do. The claim that there needs to be income equality is a claim that there needs to be suppression and exploitation. Such suppression and exploitation will benefit those who live off government: academics, investors, Wall Street executives, corporate executives, government officials, and public employees.

The issue these special interests must deflect is the stagnant real wage. This has been caused by government policy, regulation, and monetary expansion, for wages lag inflation. In the late 19th century, during the gold standard period, Americans could save. In the post-1970 inflationary period, Americans have slaved, not saved. Americans have become the serfs of bankers, corporate executives and public employees.

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Mitchell Langbert

About Me

I have researched and written about employee benefit issues and in my previous life was a corporate benefits administrator. I am currently associate professor of business at Brooklyn College. I hold a Ph.D. from the Columbia University Graduate School of Business, an MBA from UCLA and an AB from Sarah Lawrence College. I am working on a project involving public policy. I blog on academic and political topics.